MSC applies $1,500 reefer rate hike globally Jan. 1

Wednesday, October 24, 2012

The liner carrier Mediterranean Shipping Co. (MSC) said Wednesday it will raise refrigerated cargo rates globally on Jan. 1, joining a growing list of carriers planning to do so in the new year.
The increase, $1,500 per reefer container, is in line with an increase announced by Maersk Line in September.
“Current levels of reefer rates are inadequate to offset the very high and increasing operating costs being incurred,” MSC said in a statement.
Maersk and MSC are the two biggest container lines in the world. The third biggest, CMA CGM, also intends to hike reefer rates on protein, seasonal fruits, and fast-moving consumer goods shipments by $1,500 per container from Jan. 1.
“Offering a containerized reefer solution is costing 70 percent more than a dry shipment,” CMA CGM said in an Oct. 9 customer notice. “We need to invest in vessels with sufficient plugs, in sophisticated reefer containers and in gensets. Whether it comes from fuel or electricity, the cost of energy needed for use of these equipments is in constant growth. To be able to maintain our commitment to serve our customers to the upmost level and sustain our development, freight rates must be differentiated from rates applying to dry containers.”
The idea that sagging dry rate levels have impacted reefer rates was corroborated by Mathijs Slangen, maritime advisor for the Seabury Group.
“The interesting question is, obviously, why did the carriers let the rates slip to this level?” Slangen told American Shipper in early October. “I believe rates were just dragged down, or did not increase to compensate for higher costs, by the dry rates.”
Maersk’s increase has apparently set in motion a series of maneuvers by its fellow lines, who were left to decide whether to try to pick up market share or match the increase. Some have chosen to make other moves. Hyundai, for instance, announced this month is was halting reefer service from the U.S. East Coast to Asia from Jan. 1. The carrier said non-compensatory rate levels were one factor, while the tying up of key refrigerated assets from other, more lucrative trades was another.
As a backdrop, containerized reefer volume grew 13 percent in 2011, nearly double the growth rate of 2010. Part of the increase is attributable to the decline of the specialized conventional reefer cargo fleet over the last decade, a decline aided by container lines actively luring reefer cargo away. - Eric Johnson